ERC-721 Tokens – What You Need to Know About How ERC-721 Tokens Work and Their Applications

2018-09-10T13:07:12+00:00September 10th, 2018|

ERC-721 tokens have already become superstars in the crypto token universe even though most crypto fans have not heard of them. Axiom Zen, developers of the famous Cryptokitties feline avatar trading network, brought the protocol behind ERC-721 to life. ERC-721 stands for Ethereum Request for Comment for standard 721. Unlike ERC-20 tokens which are designed to be equivalent to one another, ERC-721 tokens are each unique or non-fungible. Fungible refers to being interchangeable as one dollar is for another dollar.

ERC-721 Token Features Open New Possibilities for Asset Tracking

ERC-721 tokens essentially have mathematical DNA that makes each token different from every other token. With this characteristic of non-fungibility and deterministic identity, an ERC 721 token can serve a variety of purposes where maintaining identity associations is critical.

Cryptokitties demonstrated the immediate utility of ERC 721 tokens with tracking digital assets. Each crypto kitty represents an ERC 721 token and has properties distinguishing it graphically and mathematically from every other crypto kitty. Just as Cryptokitties can breed and produce other unique Cryptokitties, ERC 721 tokens can be combined to produce unique ERC 721 token offspring. The methodology and ultimate result of combining ERC 721 tokens depend on how developers write the smart contracts, but the capability is built into the ERC 721 protocol.

Now imagine that instead of graphical avatars in the Cryptokitties world, we decide to track real assets including documents like wills or real estate deeds with verified signatures. Gold coins could also have embedded ERC 721 tokens RFID chips or micro-dots that define the origin and interaction of each coin. Virtual products and real-world products could become ERC 721 trackable and unique with embedded chips or imprints.

Art pieces could apply steganography to embed ERC 721 token information that clarifies and verifies the origin and authenticity of the art piece. Every valuable asset could be tracked using ERC 721 tokens because each token represents a one-off version.

ERC-721 Tokens are a Natural Fit for High-Security Identification

ERC 721 tokens are also a natural fit for identifying populations of any sort including human beings in trust networks or online. The reason that the ERC 721 tokens apply so well for online or trust networks when individuals may not know each other directly, is that each token’s uniqueness works without revealing the owner of a token. This allows for enforcing reputations without having to break privacy.

Already the properties of ERC 721 tokens have moved it into the burgeoning arena of asset tracking. The limiting factor for ERC 721 tokens happens to be the Ethereum network bandwidth issue. Cryptokitties has already used up to 25% of the ethereal bandwidth at times slowing the network down appreciably.

When the Ethereum network solves its scaling issues, ERC 721 tokens are well positioned to create a new business silo for cryptocurrencies in tracking digital and real assets. With trillions upon trillions of dollars of assets that could potentially be tracked, the first movers in the ERC 721 space will be entering a potentially multi-billion-dollar growth market.